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Can Outfront's Asset Buyouts Mitigate Soft Market Concerns?

Outfront Media Inc. OUT is enhancing its portfolio with strategic buyouts and asset swaps. In fact, recently, the company announced an asset swap with Independent Outdoor Network. This helped the company acquire digital billboards in the Boston designated market area (DMA) and shed its static display assets in non-metro areas of Wisconsin, Missouri, Illinois, Tennessee and South Carolina.

Earlier, Outfront had announced the acquisition of equity interests of specific Canadian subsidiaries of All Vision LLC. This helped Outfront boost its property base, with a portfolio of digital billboards in Toronto, Montreal, Calgary, Edmonton and Vancouver. The company shelled out around $50.0 million in cash and $44.4 million in Class A equity interests.

Outfront already enjoys a geographically diversified asset base, with its advertising sites being present in 36 states, as well as in Washington D.C. and Canada. This diversification helps the company draw a wide range of audience. Moreover, its tenants come from a broad range of industries, including healthcare/pharmaceuticals, retail and television. This diversity, both geographically and industry wise, makes the company’s revenues less volatile in nature and stokes its long-term growth.

However, the company’s first-quarter 2017 results mirrored a softness in the national advertising market, specifically in the automotive category. This weakness is expected to stretch in the second quarter as well. Further, competition from other outdoor advertisers for customers, seasonality of business, dependence on the prospects of advertisers and national economy, and any rise in interest rates pose challenges for the company.

Also, shares of Outfront underperformed the Zacks categorized REIT – Equity Trust – Other industry over the past three months. During this time frame, shares of the company declined 13.1%, whereas the industry descended 2.1%.

The Zacks Consensus Estimate for Outfront’s funds from operations (“FFO”) per share for second-quarter and full-year 2017 remained unchanged at 54 cents and $2.04, respectively, over the last 30 days. The stock currently carries a Zacks Rank #3 (Hold).  

Stocks to Consider

A few better-ranked stocks in the REIT space include Liberty Property Trust LPT, PS Business Parks, Inc. PSB and Whitestone REIT WSR. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liberty Property Trust and PS Business Parks have long-term growth rates of 6% and 5%, respectively.

Whitestone REIT’s FFO per share estimates for 2017 moved up 3.96% to $1.05, over the past 60 days.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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